Executive Briefing Series: Fiber M&A: Operations and Opportunity
If the acquisition thesis was decreasing the time to subscriber growth, then the operational integration strategy must be repeatable.
The opportunity
Across multiple conversations with fiber operators pursuing growth, one theme continues to emerge: consolidation. There is clearly an uptick in merger and acquisition activity in the fiber broadband industry. The trend is accelerating to the point that the most recent announcement is very quickly eclipsed by something even more recent. Clearly the Tier 1 operators are active, but so are multiple other mid-market fiber providers.
This makes sense when you look at the alternatives for footprint growth. New fiber build is time consuming, challenging and capital intensive. And frequently it is not actually new build but rather a new overbuild, which adds direct competition for subscriber acquisition as an additional element of the business case.
Acquisition offers advantages in time and scale. The acquirer can immediately gain footprint and subscribers and can leverage their brand across an existing network to deliver improved take rates. Financially speaking, acquisition is also often accretive, increasing the value of the enterprise more so than new build might.
The desire is plain. Move quickly to bring an acquired network under the brand of the acquirer and, crucially, establish repeatability to enable scale via other acquisitions and partnerships.
The brand represents something valuable, providing a common experience to the customers, from sales to installation to support. With each network acquired, the objective is to get quickly from Day 0 (the close) to Day 1 (the migration of existing customers and the launch of new sales under the acquiring brand).
True scalability of the acquisition model, however, comes with process repeatability. Don’t just integrate the acquisition, build the capability to integrate every subsequent acquisition, and make acquisition itself a repeatable growth motion. And, beyond that, allow the flexibility for partnerships other than acquisition, such as retailing on a wholesale network, which is rapidly becoming a common form of footprint extension.
The challenge
But there is a catch. Every acquired network brings its own operational playbook. The PON vendor and the OSS itself may be different. The inventory systems, workflows, service definitions, field processes and support models will all be from different playbooks.
Unifying the operational processes under the common umbrella of the acquirer’s customer-facing brand or digital retail layer is a challenge. The operations playbook needs to be common.
And if the thesis of the acquisition was time to market and better use of capital, then operational integration cannot burn through that time and capital advantage.
The decision tree
This sets up some choices, which, if they were not made before Day 0, will need to be addressed after. And they will impact repeatability, speed and success of the acquisition process. Unfortunately, many of the options are not palatable.
The first branch of the decision tree is whether or not to do anything at all towards operational integration. After all, these are already functioning networks, so why not just leave them alone?
But choosing to do nothing is complex. The existing systems are rarely neat and tidy. Very often they are a combination of solutions built over many years, some that simply have to be kept and some that folks would gladly be rid of. The ongoing support and cost of two sets of operational systems is not optimal.
But more importantly perhaps, running parallel non-integrated operations makes leveraging the brand and a common retail front end very difficult. It introduces complexity. And complexity negatively impacts the process for new subscriber adds and increases the operational effort of subscriber support. Further, slow complex processes are rarely invisible to the end customer. Customer perception of the brand will be negatively impacted, from the install of a new add to the support calls that come in over the lifecycle of the customer.
Delivering on the quick growth promised by acquisition can be unintentionally delayed by the choice to do nothing.
The cure to this, perhaps obviously, would be a choice to do something towards operational integration. And here the traditional approaches carry their own baggage.
- Full platform migration or replacement of operational systems is expensive and time consuming.
- Bespoke integrations are expensive and time consuming, and worse yet, they are unique to a particular network. So the next network acquired will have to endure another bespoke integration project from ground zero. No repeatability or economy of scale. And to investors, one of the key metrics driving acquisition-based growth will be repeatability. Custom integration may solve today’s acquisition, but operational federation requires a capability for every acquisition that follows.
Both of these options happen after the acquisition, consuming critical talent just at the time that resources are most over-committed. This can delay the operational integration itself and also impact other business-critical projects.
There is consensus building that operational integration is required to deliver the commitment to growth behind a single brand, and that it must be both timely and repeatable to deliver on the commitments made when the acquisition was approved.
How to achieve this is the challenge, but there is another option.
The solution: Open Access 2.0
At VX Fiber we have framed the challenge and the solution as Open Access 2.0.
Open Access 2.0 is an operating model in which multiple networks can behave as one coherent service platform under a single brand, without requiring technology uniformity in the underlying network or synchronization of future technology decisions.
Open Access 2.0 requires a normalized service layer that translates the different underlying networks into repeatable commercial and operational consistency, so that new network partners can be onboarded more quickly, products can be interpreted more consistently, orders can be orchestrated predictably, and assurance can be managed transparently across network boundaries. The operations playbook needs to be common.
Crucially, this is not a replacement of the retail ISP’s digital retail layer, the customer-facing systems that already exist such as sales, CRM, billing and help desk. Unifying the operational processes of the acquired network under the common umbrella of the acquirer’s customer-facing brand or digital retail layer is exactly the objective, without setting up a scenario where the integration approach must be rebuilt every time the business grows.
And there is a second-order advantage. The value of Open Access 2.0 extends beyond acquisition. It creates the architectural flexibility to modernize and change operational systems independently, rather than making each future technology decision another extension of a bespoke integration project.
Put simply, bespoke integration links future technology and systems decisions to what you have built now. Open Access 2.0 decouples this, meaning that even if you only do one acquisition, you have chosen a solution that provides future flexibility.
The right question
Over the past several months we have spoken with many operators pursuing growth through acquisition, integrating recently acquired networks, delivering service on wholesale networks, and planning future M&A activity. Increasingly, operational integration is part of the discussion. In one recent engagement, VX Fiber was retained prior to the acquisition to evaluate operational integration and workflow alignment.
Although each acquirer has their own perspective, the common question is: how quickly can we operate the new network (and the next new network) under our brand and operational playbook?
Simply documenting what systems the target network has will not properly evaluate the potential risk in getting from Day 0 to Day 1. It’s more than what do they have. It’s how long until we can operate it?
The right answer
At VX Fiber we offer two stand-alone capabilities to address this challenge.
VX ENGINEERING SERVICES
Operational Readiness Assessment
Before committing to an acquisition, investors look for confidence in the plan. And to be confident in their own commitments to investors and boards, operators need to understand the operational path from Day 0 (close) to Day 1 (selling under the acquiring brand). This is the first step in securing the time advantage the acquisition offers.
This is not simply an evaluation of the systems and processes the target acquisition has. It is an engineering-based evaluation designed to provide clarity and confidence in the operational strategy behind your acquisition or partnership. It is the support you need to evaluate the roadmap to bringing their workflows and systems in line with your own: the intersection between your operational systems and theirs.
VX Engineering Services starts with operational strategy and then provides an assessment focused on identifying workflow dependencies, integration risks, implementation sequencing and the fastest path to operational readiness.
We will help you identify, before close, the challenges you will have to address after Day 0 to capitalize on the time advantage that acquisition can deliver.
VX SUITE
Software that supports operational federation
Once the operational roadmap is understood, the next challenge is executing it without forcing a wholesale replacement of existing systems.
To that end, we offer a fully modern, microservices-based, cloud-native software solution to bridge the gap between your digital retail front end and the underlying OSS of the acquired network.
Our product abstracts the underlying data from the acquired network and creates a unified and homogenized data layer for consumption by workflows. The workflows are aligned with your existing digital retail layer but go far deeper in the stack to provide end-to-end capability. Critically, we also keep state for inherently asynchronous workflows such as installation and help desk support.
This solution is not a one-size-fits-all replacement. It can be tailored to specific workflows (all or some, as your needs dictate), does not mandate replacement of existing systems, and is easily extensible when the next network is acquired.
These architectural capabilities (abstraction, workflow alignment and state) create the operational consistency that makes repeatable acquisitions possible. The result is a simpler path from Day 0 to Day 1, for this acquisition and the next.
The value of working with VX Fiber
VX Fiber is a Swedish OSS/BSS software vendor backed by InfraBridge, part of DigitalBridge.
We have been focused on fiber network operations for 20 years. With a background as a network operator, we have experienced acquisition, wholesale models and retail service delivery, from greenfield build to decades of network operations.
We have built and refined our software based on our knowledge of what an operator actually faces every day.
Now divested of the fiber operations, we are completely focused on delivery of software and related engineering services.
